He had to drop the Model 2. It was just a car, and simply producing a car meant that Tesla was a car company... and not a tech company worth its ludicrous tech valuations.

And yes, sales are down.

Partly because many folks who could afford an EV at current prices already have one... but primarily because Musk managed to sabotage his own brand with his shenanigans at Twitter and then again when he decided to go all in with Donald.